This article is from the July/August 2010 issue of Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org/archives/2010/0710bottari.html


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This article is from the July/August 2010 issue of Dollars & Sense magazine.

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Of Bubbles and Bailouts

New Wall Street bailout accounting puts the numbers in perspective.

By Mary Bottari

The collapse of the U.S. housing bubble led directly to the largest industry bailout in U.S. history. While it will be many years yet before we can put a hard number to the amount of taxpayer dollars actually lost in the bailout, the Center for Media and Democracy (CMD) has developed an assessment of the dollars disbursed in the bailout that graphically illustrates the extraordinary lengths to which the federal government has gone to bail out the financial sector. This original Wall Street bailout accounting includes all the major bailout programs of the U.S. Treasury Department, the Federal Reserve, and other government agencies including the FDIC and the Federal Housing Authority. The tally is updated monthly and does not include stimulus funds, unemployment insurance payments, student loans, the auto-industry bailout, or other initiatives to create jobs or support ordinary people, as other bailout tallies do. CMD’s total for taxpayer dollars that have gone out the door to date: $4.7 trillion, with $2 trillion still outstanding as of June 2010. The chart below puts this extraordinary expenditure of $4.7 trillion into perspective.

Chart comparing Wall Street bailout to other large gov't expenditures

Click here for larger version of chart.

This assessment of dollars disbursed demonstrates that the hotly contested $700 billion Troubled Asset Relief Program (aka “TARP”) was only a small portion of the funds that the U.S. government rapidly deployed to aid the financial sector. Without Congressional discussion or debate, the Fed has provided the bulk of the money in the form of loans and purchases of toxic assets and other securities that may—or may not—be sellable, amounting to 80% of the $4.7 trillion. And contrary to popular belief, the bailout continues unabated as the Fed pumps money into Fannie Mae and Freddie Mac, amounting to a $1.6 trillion “stealth” bailout. The full accounting for the various Fed programs is still murky, as the Fed has fought court battle after court battle to prevent the release of information regarding certain programs. Hopefully the unprecedented Federal Reserve audit provided for in the 2010 financial-reform package will finally shed light on these “Secrets of the Temple.”

Mary Bottari is director of the Real Economy Project of the Center for Media and Democracy.

Sources: S&L bailout : “Financial Audit: Resolution Trust Corporation’s 1995 and 1994 Financial Statements” (adjusted here to 2010 dollars), gao.gov; Economic Stimulus Bill : Track the Money, recovery.gov; Health Care Reform : Congressional Budget Office, Final Reconciliation, cbo.gov; Wars : National Priorities Project, nationalpriorities.org; Wall Street bailout : Total Wall Street Bailout Cost Table, sourcewatch.org.


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